Greg Hinz On Politics

TIF abuse worse than reported, inspector general says

Chicago's tax-increment financing policies need further tightening and were more seriously flawed than had been previously disclosed, says Chicago Inspector General Joe Ferguson.

In a report issued this morning, below, Mr. Ferguson said the city "appears to have ended" a practice of requiring TIF recipients to allot a certain portion of their city grant to specified charities, chosen by city officials and often politically connected.

But new rules issued by Mayor Rahm Emanuel's administration don't go far enough to separate politics from gift giving, since the rules still allow recipients to "voluntarily" donate to charities favored by officials, the report says.

At issue is a policy that became common during the Richard M. Daley administration in which TIF recipients were effectively ordered to pass on a cut of what they got from the city to a charity selected by officials, often After School Matters, which was particularly close to the Daley family. In an October 2011 report, Mr. Ferguson found that 27 of the 73 TIF grants approved by the city between 2000 and 2009 had such a clause, directing $3.7 million to private charitable groups.

Since then, the inspector general found an additional 10 "public benefits clauses" that had not been disclosed by the city, involving an additional $375,000 in required cash contributions to private entities.

Mr. Ferguson, in his report and a statement, strongly suggests that the lapse was not intentional but due to bad record-keeping that the Emanuel administration had difficulty unwinding after the new mayor was elected in the spring of 2011.

But Mr. Ferguson is more explicit in what he sees as flaws in new policies enacted by the Emanuel administration.

The new policies ban required donations to charitable groups unless they are "integrally involved in a TIF-funded project," and that's good, the report says. But, "because the (new) guideline does not eliminate the naming of private entities as recipients of public benefits clauses . . . the door (is) open to permit city employees' direct or indirect suggestion of favored recipients."

The city could avoid that if it were to issue public criteria for who gets required charitable contributions from TIF proceeds. The failure to do so "constitutes a continued program shortcoming," Mr. Ferguson says.

The Emanuel administration had no immediate response.

Update, 2:20 p.m. — Team Emanuel has no formal response to the report, but notes that Mr. Ferguson concluded that the old policy of requiring charitable donations has ended and that the report says the city has been “responsible to the concerns raised (in the new report) and has taken steps to address those concerns.”

The Inspector General's office confirms that further changes have been made by the city in the wake of today's report. In other words, the office says it's now content that cash charity-giving is no longer a problem. But it expresses no opinion on in-kind donations by TIF recipients to charities.